Civil Service AVC

berbatov10

Hi I work for the Civil Service and contribute to their Alpha pension scheme. I am in a fortunate position where I can afford to make AVC's.
Having looked on Civil service Website I see these are managed by Legal and General
I wondered if anyone had any views or information about them as an AVC provider? 
Thanks in advance 
 

ArchaeoNeo

They are OK, cheap & cheerful for what they do - I think their default fund carries a 0.19% charge but this may have changed. They aren't in any particular rush to add funds to your pension each month, it's normally at least 3 weeks after payday but I don't believe this is unusual. Come next April I will probably be buying more added alpha pension instead/as well - it all depends what your personal pension goals and requirements are. I also do epa which you may feel is worth a look too AVCs are ok for a quick fix in offsetting tax as relief is at source - if that's of any use to you.

Dizee123

I would agree that you need to work out what your goals and requirements are.  I started AVCs in Classic in my 20s and was allowed to contribute 1.8% (you were more limited in these days, I believe).  Some of my older colleagues had said that this was a 'good thing' to do, but I didn't really worry too much about pensions in these days as I was busy with children.  As the contributions were taken off salary before I received them, I didn't really notice and kind of forgot about them over the years.  However, that 1.8% has now grown to an amount which will allow me to fund 2 years of early retirement and defer taking my pension to avoid 2 years of actuarial reduction, so I am quite pleased that my younger self listened to them.  That was with Standard Life and mine remained with them but they started a new one with Legal and General.  I wish a forum like this existed when I was younger as I may have planned my life better. 

berbatov10

My situation is that I have retired from the Police service so already have a pension, my new employment with Civil Service has a pension with it so thought I might make AVC as they are tax efficient and another income stream in later life. 
I guess the second part of my question is Alpha the best Civil Service scheme to be in 

Bravepants

I used to pay into the CS AVC when it was with Scottish Widows, but I transferred it to a SIPP when I realised I had enough in there to save as cash in a SIPP, which would then carry my over a few years if I retired early. I now buy Added Pension because of the certainty of the guaranteed income from that, compared to the AVC. You might want to compare the expected return from the AVC (which is probably going to give you annuity-like returns if you stick to L&G as the provider), with the return from Added Pension. You can pay for Added Pension out of your monthly salary and/or pay a single lump sum each year. 

hugheskevi

Bravepants said:

You might want to compare the expected return from the AVC (which is probably going to give you annuity-like returns if you stick to L&G as the provider), with the return from Added Pension. You can pay for Added Pension out of your monthly salary and/or pay a single lump sum each year. 

The L+G AVC default fund is a typical multi-asset fund, and all forms of decumulation are supported. The returns will not be annuity-like (although I'm not sure what that means).

Return on Added Pension is effectively the discount rate, which is CPI+2.4%.

NedS

hugheskevi said:

Return on Added Pension is effectively the discount rate, which is CPI+2.4%.

@hugheskevi Please could you expand on that as I'd like to understand how you arrived at that (not doubting, just like to understand the return)?

Thanks

berbatov10

Bravepants said:

I used to pay into the CS AVC when it was with Scottish Widows, but I transferred it to a SIPP when I realised I had enough in there to save as cash in a SIPP, which would then carry my over a few years if I retired early. I now buy Added Pension because of the certainty of the guaranteed income from that, compared to the AVC. You might want to compare the expected return from the AVC (which is probably going to give you annuity-like returns if you stick to L&G as the provider), with the return from Added Pension. You can pay for Added Pension out of your monthly salary and/or pay a single lump sum each year. 

Can you explain what 'Added Pension' pension is please

berbatov10

berbatov10 said:

Bravepants said:

I used to pay into the CS AVC when it was with Scottish Widows, but I transferred it to a SIPP when I realised I had enough in there to save as cash in a SIPP, which would then carry my over a few years if I retired early. I now buy Added Pension because of the certainty of the guaranteed income from that, compared to the AVC. You might want to compare the expected return from the AVC (which is probably going to give you annuity-like returns if you stick to L&G as the provider), with the return from Added Pension. You can pay for Added Pension out of your monthly salary and/or pay a single lump sum each year. 

Can you explain what 'Added Pension' pension is please

I have just googled it thanks 

hugheskevi

NedS said:

hugheskevi said:

Return on Added Pension is effectively the discount rate, which is CPI+2.4%.

@hugheskevi Please could you expand on that as I'd like to understand how you arrived at that (not doubting, just like to understand the return)?

It is the standard discount rate used by the Scheme Actuary to calculated the cost of Added Pension (and many other values/costs/contribution rates within the scheme).

The Scheme Actuary works out future cashflows using scheme assumptions (including expected longevity) and then uses the discount rate to arrive at a capitalised value equivalent to those future cashflows. The discount rate changes over time, but is currently CPI+2.4%. If the discount rate is higher, Added Pension costs less, if lower it costs more.

83705628

hugheskevi said:

NedS said:

hugheskevi said:

Return on Added Pension is effectively the discount rate, which is CPI+2.4%.

@hugheskevi Please could you expand on that as I'd like to understand how you arrived at that (not doubting, just like to understand the return)?

It is the standard discount rate used by the Scheme Actuary to calculated the cost of Added Pension (and many other values/costs/contribution rates within the scheme).

The Scheme Actuary works out future cashflows using scheme assumptions (including expected longevity) and then uses the discount rate to arrive at a capitalised value equivalent to those future cashflows. The discount rate changes over time, but is currently CPI+2.4%. If the discount rate is higher, Added Pension costs less, if lower it costs more.

Seems bullish, because I'm assuming that number comes from expected nominal GDP growth, I.e. the return the government expects in additional tax revenues if they just threw money as the economy?